It’s no news that the AI startup market is expanding, from companies looking to develop new chips to those using AI to build robots and others looking to use AI to create niche solutions for industry-specific workflows. There are many potential areas for venture capitalists to invest in, but there are clearly some subsectors they are more excited about than others.
We surveyed 20 venture capitalists who invest in startups about their predictions for 2025 and indicated their preferences.
Mark Rostick, senior vice president and managing director at Intel Capital, said that now that the big fundamental models have been established (at least in his view), the next interesting area to invest in is task-specific AI solutions.
“I find models that excel at specific functions particularly intriguing, especially when combined with agents built on top of them,” Rostick said. “As AI adoption accelerates, application-focused businesses will take center stage, as CEOs increasingly look for ways to leverage AI in specific areas that will deliver tangible, transformative impact.”
Mike Hayes, managing director of Insight Partners, echoed this statement, adding that he will look to support companies that build products that use AI to reduce business friction.
“I look for solutions that solve cross-cutting or end-to-end challenges unique to enterprises, areas where traditional solutions have fallen short,” Hayes said. “This includes vertical and people-specific workflows reimagined with GenAI or agent automation and security innovations that not only identify and alert, but also remediate.”
Venture capitalists interested in pursuing companies that target specific enterprise use cases will have to make sure that these startup solutions are actually businesses, and not just functions. Otherwise, we could see a repeat of the SaaS boom in 2021, when many companies that were really just one-note functions raised gobs of venture capital before being left behind in favor of companies offering platform solutions when enterprise budgets contracted in 2023.
Of course, there are tasks that are important enough to warrant a single-function solution. In the case of SaaS, we overwhelmingly heard that enterprises would continue to pay for companies that offered specific cybersecurity solutions. In the case of AI, it is not yet clear what point solutions enterprises will be willing to pay for. Ed Sim, founder and general partner at Boldstart Ventures, acknowledged this challenge.
"The trick is to skate to where the puck is going to be and also think about whether it's a feature, a product or a business," Sim said.
Another area that VCs are excited about is reliability and resilience. Jason Mendel, an investor at Battery Ventures, said he is looking to invest in companies in the observability and reliability space. Liran Grinberg, co-founder and managing partner at Team8, also has his sights set on what he calls “enterprise resilience.”
“The Crowdstrike software update incident demonstrated how fragile our digital world is, not only due to cyber attackers but also to mistakes,” Grinberg said. “We need a more resilient digital infrastructure that is not fragile by design.”
AI infrastructure will also continue to be a major area of investment in 2025. Venture capitalists cited that with the advancements related to AI agents, they are looking into the infrastructure needed for businesses to adopt the technology, as well as companies that can also help determine the pricing of AI agents.
“We are still in the early stages and I believe the momentum for AI infrastructure will continue through 2025, particularly as agent frameworks proliferate, new modeling paradigms (including reasoning) are developed, cutting-edge AI advances, and the UI/UX of AI applications evolve to include the use of computers,” said Janelle Teng, vice president at Bessemer Venture Partners.
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